While walking the floor at BEA last week and meeting with a number of small to medium-sized publishers (as well as a few larger ones), it became clear to us that the Mergers and Acquisitions market in publishing is about to become active again after a couple of years of relatively light activity. On the potential sellers’ side, many are simply ill-equipped or unwilling to continue dealing with the massive change the industry is undergoing and would like to cash out while they still have an attractive ongoing business. On the buyers’ side valuations of potential acquisition targets, even those with very attractive content have reached levels at which a reasonable ROI is achievable and many of them believe that they can exploit sellers’ content further than the original owners.

Potential sellers often ask us, “If I did want to sell, what should I do to maximize the value of my business?” (because everyone is bashful about saying “I want to sell”). We’ll return to the subject of how to arrive at a company’s value in another post (it’s complicated) but for now, we’ll point out some things business owners can do to prepare for sale if and when they decide it’s time to pull the trigger. Many of them are common sense business practices, but following them can make it much easier for a potential buyer to embrace the company and ultimately to say, “Yes” at an attractive valuation.

An important part of any buyer’s due diligence will be to understand the publisher’s strategy and forecasts. Step one in this understanding is to have Written Strategic Planning Documents, including a 5-year business plan, Annual budgets, Operational goals and objectives, Key success factors (including a SWOT analysis), Organization charts for both personnel and operations.

Third, you’ll need to collect and organize Important Business Contracts and Agreements. (They are all in writing, aren’t they? If not, fix that now.) These could include Shareholder agreements, including loans, Bank or other borrowing agreements, Employee agreements, Long-term leases, purchasing commitments and customer contracts, Facility/building lease agreements, Licensing, franchise and distribution agreements, Trademark names and patents, Author agreements and any other documents that are critical to the ongoing business.

Fourth, Prepare for the Actual Sale. You’ll need to create a transition plan, thoroughly Understand your business’s value, Build flexibility in the company to survive if the transaction doesn’t take place, Find qualified partners to do the specialty work (Accounting, Tax, Legal, Sale Representation) so you can focus on the next point.

Finally, Run the Business as if It Were Going to Belong to You Forever. Buyers want to see an active ongoing business so continue to acquire, edit, produce and market normally. Trying to dress up or maximize for the short term before a sale seldom fools buyers.

Owners can increase their business value by developing and implementing an exit strategy. If you have (or might have) an interest in selling your publishing business at any time in the next five years, beginning to get these things in order will help maximize your company’s value in any market conditions.